"Negotiations over the formal contract on the KF-X program are going well. It seems to be possible to sign it around Dec. 28," the agency official said on the condition of anonymity.

South Korea hopes to produce its own fighter jet to replace the aging fleet of F-4s and F-5s by mid-2020.

Last month, KAI secured Indonesia's assurance that it will pay for 20 percent of the total cost expected to reach $15 billion.

Under the contract between the DAPA and KAI, six test planes will be manufactured by 2025, according to the official.

The KF-X project received a boost from the U.S. pledge to transfer some of its jet technologies. But South Korea faces a daunting task of finding an alternative as the U.S. made it clear that four core technologies will be excluded.